Key Takeaways
KPMG cited AI efficiency in negotiating a 14% cut in its own audit fee.
Other audit clients are now using the KPMG precedent to push for lower fees.
AI is weakening the traditional link between professional fees and human hours.
For audit firms, the key question is who captures the productivity gain: the firm, the client or audit quality.
The same pricing pressure is already emerging across consulting and other professional services.
There is something almost comical about the story of KPMG International and its auditor, Grant Thornton UK.
Last year, KPMG decided it was paying too much for its audit.
Its chief financial officer, Michaela Peisger, pressed Grant Thornton for a substantial reduction in its audit fee. One of the arguments she made was that AI should allow an auditor to work more efficiently.
To be fair, there were also other factors mentioned in the negotiation. KPMG pointed to the relative simplicity of its accounts and Grant Thornton’s existing familiarity with the organisation. According to the Financial Times, KPMG made it clear that if Grant Thornton did not agree to a substantial discount, it would walk.
Grant Thornton caved. The 2024 audit fee was $416,000. The 2025 fee fell to $357,000 — a reduction of about 14%.
What KPMG may not have anticipated was how quickly its argument would travel.
Seven months later, the same AI-efficiency logic is being turned back on the Big Four themselves.
KPMG’s argument has created an interesting precedent
Downward pressure on audit fees had already begun when KPMG shot its own goal. Prior to 2025 fees were rising by approximately 4% to 5% per annum in the UK, buoyed in part by the increasing regulatory demands to improve audit quality in the wake of scandals such as Carillion, and by the operational separation of the Big Four’s audit practices from the rest of their businesses. Meeting those demands required investment in people, controls and technology — and that was reflected in the price of audits.
The average cost of an audit for a UK public company rocketed from £397,000 in 2017-18 to £694,000 in 2022-23, according to research by the Quoted Companies Alliance — a 75% increase over five years.
In 2025, the trend broke, with audit bills rising by less than 2%, broadly in line with inflation. And the news is even bleaker for the Big Four when it comes to FTSE 350 companies, a third of which paid less for their audits last year.
The KPMG - Grant Thornton negotiation, and the resulting 14% fee cut, has now given clients ammunition. Source Global Research recently surveyed 300 buyers of external audit services and 18% said they were already using the KPMG example to press their own auditors for lower fees. Another 48% were considering doing so.
So basically, one of the world’s largest audit networks has effectively given its clients a master class on how to push back on audit fees. And the timing could hardly be better, as corporate buyers scrutinise audit costs after several years of steep fee inflation.
If additional work helped justify higher fees, clients can reasonably ask whether technology that reduces the amount of work required should exert pressure on fees too.
That, after all, is the argument Michaela Peisger made herself.
And Peisger is not an ordinary audit client. Before becoming KPMG International’s CFO, she was a long-time audit partner and executive at KPMG’s German member firm.
The Big Four have made the efficiency argument themselves
The Big Four cannot argue that AI has no effect on productivity, because productivity is one of the reasons they have been investing so heavily in it, and they have spoken about it at length. Again and again, Big Four announcements about new AI investments and partnerships have emphasised productivity and efficiency gains.
But of course this is a simplistic argument. AI systems are expensive. They have to be developed or licensed. Staff have to be trained to use them. Outputs have to be reviewed.
There is also another complication. As clients use AI to manage their financial reporting, auditors end up with new systems to inspect. In other words, AI could remove work from one part of an audit while creating work somewhere else.
But none of those qualifications removes the commercial problem.
Because the important development is not that AI has already made audits dramatically cheaper.
It is that clients have discovered a new negotiating argument.
And KPMG supplied it.
This is bigger than audit
The same tension is appearing elsewhere in professional services. Big4News examined the same problem earlier this year in its analysis of McKinsey’s Project Acorn.
Traditional consulting economics had relied heavily on time-based billing and the leverage created by large numbers of junior consultants working beneath a much smaller group of highly paid partners.
Tasks that historically absorbed huge quantities of junior time — research, data analysis, document review, drafting and presentation preparation — can increasingly be done much faster using AI.
Clients are now pushing consulting firms towards arrangements in which fees are tied to measurable results rather than simply to the amount of human effort deployed.
Instead of saying:
This will require 5,000 hours of our people’s time.
Firms increasingly need to say:
This will create £20 million of value for you.
Such a model could work for consultants. But it does not work for audit.
Audit cannot simply price the outcome
Audit independence rules make many of the most obvious outcome-based pricing mechanisms inappropriate or impossible. After all, an auditor plainly cannot be paid more because the client receives an unmodified audit opinion.
That leaves audit firms with a particularly difficult version of the AI pricing problem.
If clients become less willing to pay according to the amount of human effort expended, what exactly should determine the price?
Who gets the AI dividend?
This ultimately becomes a battle over who captures the economic value created by technology.
The firms have invested enormous sums in AI. From their perspective, those investments are intended partly to improve quality and partly to improve productivity. It is entirely rational for them to expect a return.
Clients may beg to differ. Seen from their perspective, if AI enables audit firms to deliver work using fewer people or fewer hours, the audit should cost less.
KPMG’s negotiation with Grant Thornton shows that it understands the buyer’s argument because it is one. Now other buyers understand it too.
This article is part of the Big4News Investigations & Analysis series, which examines the structural forces shaping Deloitte, PwC, EY and KPMG.
Trying to keep up with technology at Deloitte, PwC, EY and KPMG? Start here →
https://www.big4news.com/t/technology-and-ai
About Claudine Cassar
I’m a corporate anthropologist and former Deloitte equity partner. I sold my technology business to Deloitte in 2016 and led the Malta Consulting team for five years. I am the founder and editor of Big4News, which provides independent, clear analysis of PwC, Deloitte, EY, and KPMG — free from corporate spin.
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